A Random Walk Down Wall Street

A RANDOM WALK

DOWN WALL STREET

The Time-Tested Strategy for

Successful Investing

BURTON G. MALKIEL

W. W. NORTON & COMPANY

New York ? London

FOR NANCY AND PIPER

CONTENTS

Preface

Part One

STOCKS AND THEIR VALUE

1. FIRM FOUNDATIONS AND CASTLES IN THE AIR

What Is a Random Walk?

Investing as a Way of Life Today

Investing in Theory

The Firm-Foundation Theory

The Castle-in-the-Air Theory

How the Random Walk Is to Be Conducted

2. THE MADNESS OF CROWDS

The Tulip-Bulb Craze

The South Sea Bubble

Wall Street Lays an Egg

An Afterword

3. SPECULATIVE BUBBLES FROM THE SIXTIES INTO THE NINETIES

The Sanity of Institutions

The Soaring Sixties

The New ¡°New Era¡±: The Growth-Stock/New-Issue Craze

Synergy Generates Energy: The Conglomerate Boom

Performance Comes to the Market: The Bubble in Concept Stocks

The Nifty Fifty

The Roaring Eighties

The Return of New Issues

Concepts Conquer Again: The Biotechnology Bubble

ZZZZ Best Bubble of All

What Does It All Mean?

The Japanese Yen for Land and Stocks

4. THE EXPLOSIVE BUBBLES OF THE EARLY 2000s

The Internet Bubble

A Broad-Scale High-Tech Bubble

Yet Another New-Issue Craze



Security Analysts $peak Up

New Valuation Metrics

The Writes of the Media

Fraud Slithers In and Strangles the Market

Should We Have Known the Dangers?

The U.S. Housing Bubble and Crash of the Early 2000s

The New System of Banking

Looser Lending Standards

The Housing Bubble

Bubbles and Economic Activity

Does This Mean That Markets Are Inefficient?

Part Two

HOW THE PROS PLAY THE BIGGEST GAME IN TOWN

5. TECHNICAL AND FUNDAMENTAL ANALYSIS

Technical versus Fundamental Analysis

What Can Charts Tell You?

The Rationale for the Charting Method

Why Might Charting Fail to Work?

From Chartist to Technician

The Technique of Fundamental Analysis

Three Important Caveats

Why Might Fundamental Analysis Fail to Work?

Using Fundamental and Technical Analysis Together

6. TECHNICAL ANALYSIS AND THE RANDOM-WALK THEORY

Holes in Their Shoes and Ambiguity in Their Forecasts

Is There Momentum in the Stock Market?

Just What Exactly Is a Random Walk?

Some More Elaborate Technical Systems

The Filter System

The Dow Theory

The Relative-Strength System

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